Abiding by the Rules

AS China was one of the largest economies in the world, it was not treated completely as a developing country when it joined the WTO in 2001. Back then, China was transforming from a planned economy to a market economy. Therefore, in addition to the nearly 30 multilateral agreements, China was required to follow some special terms and rules, including transitional period examination, special safeguard measures and Article 15.

Transitional period examination requires China to report its policy implementation and accept examination by other member states. Special safeguard measures may be taken when other countries are affected by imports from China. These WTO members restrain imports from developing countries such as China in order to protect their domestic industries. The restraint methods include growth rate restriction and export quotas. Developed countries took 10 years (1995-2005) to remove the restriction. However, when it came to 2005, they especially postponed by three more years canceling the restriction on China. And China accepted it. Article 15 was exploited to use the surrogate country method against Chinese exports. Under the method, the authorities determine whether or not to impose tariffs on the basis of reference prices in a third country rather than product prices in the exporting country. The protocol, however, says that “in any event,” WTO members may not use the surrogate country method against Chinese exports beyond the 15-year transition period following China’s WTO accession.

Since China joined the WTO in 2001, it has adhered to WTO rules and thus benefited from the mechanism.

First, by following WTO rules, Chinese enterprises have been protected in the international trading environment. Second, foreign enterprises are more willing to develop business in China because they can be safeguarded by regulations in a more developed trading environment. Third, domestic awareness of abiding by laws and regulations has been enhanced, so that further progress can be made in political, economic and social development.

Besides, as China has become the world’s largest goods trader and the second largest economy, the nation has reached a higher international position by virtue of which it can participate to a greater extent and have a larger say in global economic governance.

Meanwhile, on November 8, 2016, the European Commission released a new legislative proposal, replacing the “market economy” standard with the principle of “market distortion.”